The Third Step: Protect

“It requires a great deal of boldness and a great deal of caution to make a great fortune, and when you have it, it requires ten times as much skill to keep it.”- Ralph Waldo Emerson

Protecting what you have seems all well and good when it comes to stain-protecting your new carpet but it’s quite another matter to protect your ability to earn an income or your health. Probably because it costs more and it’s more complicated and most of us cannot add another thing to our to do lists such as analyzing appropriate insurance coverage. But it’s hard enough to earn and save money to risk losing it.

Protection against financial loss is necessary in the following areas:
Health (most bankruptcies are a result of overwhelming medical expenses)
Premature death: To pay off debts, pay final expenses (funeral) and to provide resources to the surviving spouse and/or children.
Disability: In the event you cannot work, you still incur living expenses. Disability income insurance provides an income source if you are deemed disabled.
Property damage or theft: Homeowner’s/renter’s, automobile, liability, boater’s to repair or replace what’s been damaged, stolen of your property or other people’s property.
Superannuation (living too long): Annuities are designed to protect against this risk because immediate annuities provide an income for life, regardless of how long that life may be.
Long term care: In the event you are unable to care for yourself and your family members or friends cannot care for you, you may need to be placed in a nursing home, receive home health care or reside in an assisted living facility. This all costs money, a lot of money in most cases. It is not unusual for people to use their entire nest egg on long term care costs. These costs are not covered by health insurance and a person only becomes eligible for Medicaid to cover the costs when one falls below certain poverty levels. Long term care insurance pays for such care so you may retain your resources for other purposes.

Protecting what you own is part of the stewardship of your resources.